An attorney for California specialized mobile radio station owner Marc Sobel is preparing to appeal a ruling by a Federal Communications Commission administrative law judge that revoked Sobel’s licenses, denied scheduled hearings on others and dismissed his pending finder’s preference applications.
FCC administrative law judge John Frysiak ruled that a business agreement between Sobel and James Kay Jr. essentially transferred control of 800 MHz licenses from Sobel to Kay. The FCC must approve any such license transfer.
“The judge ruled that an agreement between Mr. Sobel and James Kay Jr. constituted an unauthorized transfer of control of certain 800 MHz licenses from Sobel to Kay, and that Sobel had misled and deceived the commission regarding Kay’s involvement with the stations,” according to a press release from Sobel’s lawyer.
In a written statement, Kay said, “I am outraged by this decision. The agreement between Marc and me was prepared by Brown & Schwaniger, our former Washington, D.C., communications counsel, who assured us that it satisfied all FCC requirements … Marc and I acted in good faith. Neither of us intentionally did anything wrong or misled or deceived the commission.”
The judge’s initial decision was based on testimony given by both Sobel and Kay regarding a management agreement between the two that had Kay performing all the financial and administrative duties regarding Sobel’s licenses and Sobel being paid by the hour to maintain the facilities.
Because Sobel did not have adequate funds to enter the SMR industry on his own, Kay had prepared Sobel’s initial FCC applications for 800 MHz licenses in the early 1990s, and he also put up the money for the clearing, buildout, equipment purchases and operation of said licenses in return for the first $600 in revenues each month from each license and a buyout agreement; Sobel held no ownership papers on the equipment, but he was allowed to use it.
However, the depositions also pointed out that “Kay has retained all the money and will continue to do so until the total revenue from all the stations exceeds $9,000 a month (i.e., $600 per month x 15 stations).” Thus far, revenues are totaling between $6,000 and $7,000 per month; and Sobel has received no monies from any management-agreement stations.
Kay also has paid all Sobel’s legal fees having to do with both the licenses and the FCC’s investigation of the Kay/Sobel relationship and real party of interest.
Although Kay prepared all FCC paperwork regarding the licenses, Sobel’s name appeared as the preparer in some instances. Sobel has access to Kay’s office and computer records but only reviews revenue levels “every few months to six months.” He also works as a contract employee for Kay and is paid by the hour for work he performs on management-agreement stations.
Kay and Kay’s employees also co-mingled his and Sobel’s equipment and customers to the point where neither could distinguish between the two systems. “The salespeople do not know whether they are selling time on a repeater Kay owns, a repeater Kay manages or a community repeater,” the FCC wrote.
Following a tip that the FCC was investigating the relationship between the two, Kay and Sobel executed a formal radio system management and marketing agreement, which also gave Kay the option to purchase Sobel’s licenses in the future for $500 each. Sobel cannot sell any stations without Kay’s permission. Three stations have been sold in recent years, with Kay receiving the bulk of the revenues. The 10-year agreement automatically renews for five consecutive 10-year periods unless Kay gives 90-days notice that he wants to end it. Sobel has no control over the agreement’s renewal terms.
Sobel maintained that he remained the owner of the licenses, and that Kay had no “interest,” as defined by the FCC, in them. “Sobel testified that Kay has a direct financial stake in the management-agreement stations,” the FCC wrote. “He testified that he does not think Kay told him that a direct financial stake is an interest in a business. Kay denied having a financial stake in the licenses, but he admitted that with respect to the stations, he owned the equipment and that he obtains revenues from the stations.
Based on the record, the judge found that “Kay has been entrusted with and in fact exercised virtually all aspects of operation of Sobel’s management-agreement stations … it is abundantly clear that Kay has the ultimate control of Sobel’s management-agreement stations. This transfer of control has not been authorized by any commission action. Accordingly, the unauthorized transfer of control issue must be resolved against Sobel.”
In addition, the judge found that “both Kay and Sobel had a strong motive to withhold from the commission the true nature of their business relationship. Sobel well-realized that had be been truthful … his requests for finders preference would have been placed in jeopardy … The record compels the conclusion that Sobel is unfit to be a licensee.” No monetary forfeiture was assessed.
Sobel attorney Robert Keller said, “The initial decision is seriously flawed. We intend to submit a timely appeal of the judge’s decision to the full commission. The judge does not acknowledge, much less address, the evidence we presented and the arguments we advanced. If Mr. Sobel made any mistakes, intentional misrepresentation and lack of candor were not among them.”
